What Exactly is a Gift Tax Return
If you are a citizen of the United States, you are required to file IRS Form 709 if you have given away more than $15,000 worth of cash or property to an individual during the last tax year. This amount is known as your annual exclusion and resets every year. The gift tax is a tax on the transfer of property by one individual to another. The tax is imposed on the donor, not the recipient. The purpose of the gift tax is to prevent wealthy taxpayers from avoiding estate taxes by giving their assets away during their lifetime.
If you give away more than $15,000 in cash or property to one person in a year, your lifetime exemption of $11.4 million will be reduced. Once you go over that lifetime threshold of $11.4 million, you will have to pay taxes on the things you give away.
However, there are a few exemptions to this, including,
- If you give money to a caregiver for someone else’s medical expenses
- If you paid money to an education institution
- If you are giving the money to your spouse
Examples of When You Are Required to File
If you give someone more than $15,000 in gifts over the course of a year, you are required to report it to the IRS. Here are some examples of when you would be required to file a gift tax return,
- Elizabeth is moving from Virginia to Germany for a new job, and before she goes, she gifts her car, worth $20,000, to her sister. Because the vehicle is worth more than $15,000, Elizabeth is required to file Form 709. However, she is not required to pay taxes on it. The only difference is that her lifetime estate tax buffer is $5,000 lower.
- Andrew’s daughter is getting married, and he gifts her $10,000 to help with wedding costs. Because he didn’t give her more than $15,000, Andrew is not required to file a gift tax return form.
Filing Your Gift Tax Return with Quantum Accounting
If you have given or are planning on giving gifts that exceed the annual exclusion, it’s important to file a gift tax return. Our team at Quantum Accounting is here to help you with every step of the process. We will make sure that your return is filed correctly and on time! Contact us today to learn more about our services and how we can help!